Life insurance: Deepak Sood

I am 25 and earn Rs 22,000 a month. Which insurance plan should I buy? That would depend on your objective for buying insurance. There are different insurance plans designed to offer various benefits ranging from pure protection, health protection, savings plans and savings for retirement. Within savings plans, there are traditional plans and unit-linked plans (or Ulips). You should choose one or more plans depending on your objectives and priorities.

As a rule of thumb, your first priority should be to provide adequate financial security to your family and dependents in case of your untimely demise, then provide for any health emergencies with comprehensive health insurance. Any balance savings can be invested in long-term savings plans.

I work in a public sector bank and will retire after 15 years. How do I choose among the pension products available in the market? Should I invest in the new pension scheme (NPS)? Or, is it essential to opt specifically for a pension plan, which fund houses and insurers provide? Since you have 15 years to retire, this is a good time to plan for retirement. It would give you significant time to cope and save for future inflation. I would recommend you study all the available products, understand them and take an informed decision. It is difficult to say what plan exactly you should choose, as that would depend on your specific requirement and future plans. Pension plans offered by insurance companies are not available in the market right now. I would recommend you look at specific product offerings as well as past fund performances of various companies before you decide.

With regard to the NPS, this comes close to a personalised investment opportunity in which you make choices relating to the fund manager and the risk profile. But, in terms of flexibility to invest in equity, the scheme has its own limitations. This is because there is a cap of 50 per cent on the contribution you can allocate in equity.

If you compare the scheme with other retirement schemes such as public provident fund and employee provident fund, it is not tax-friendly. However, the management charge on the NPS is very low compared to other funds.

My 29-year old sister has polio. She earns Rs 11,000 monthly. She wishes to get herself insured and not be dependent on anybody. What kind of plan(s) should she go for? Savings products such as endowment and money back policies (without riders) are generally offered to a person facing physical challenges who has an earned and verifiable income. An appropriate extra premium is charged based on the extent of the physical challenge/s faced by the individual.